VUDU Movies on Us is the company’s first foray into free-ad-supported streaming. Will it be enough to ignite growth in its transactional VOD business?

VUDU Movies on US

Today, VUDU launched a new free-ad-support video streaming service called Movies on Us. It does not include the very latest titles, but claims to have “thousands of movies for free”. Participating studios include Paramount, WB, Lionsgate, MGM, Anchor Bay and others. The ad loads are much lower than traditional television, and quality, a hallmark of VUDU streaming, is excellent. Many of the titles stream in 1080p with full surround sound. Titles can also be rented or purchased to watch ad-free.

True Grit, Margin Call, School of Rock and Marilyn are some of the more recent movies available to stream free of charge. Older fare such as Dead Man Walking, Carrie and Wayne’s World 2 are also available. It’s difficult to know exactly how many movies are available for free, but it’s likely a small percentage of the full VUDU library. For example, I searched on two MGM movies (Goldfinger and Gone with the Wind) and while both are available, neither can be watched for free.

With the light ad load and smaller library, Movies on Us may not be a big money-driver for VUDU. However, it is still worthwhile doing, as it could help VUDU’s slow-growing TVOD business.

Digital TVOD segment sees incremental growth

The transactional VOD market, those services which rent or sell movies, has shrunk over the last year. In Q2 2015, 38.3% of US consumers used one or more of the TVOD service. That fell to 36.4% in Q2 2016. However, that includes a 3% decline in Redbox users. Absent Redbox, there was a modest 1% increase in digital TVOD usage.

Most of the TVOD segment growth went to two big providers: Amazon and Google Play. Amazon’s share of the market increased from 15.6% to 16.3% in the year ending Q2 2016. Google Play grew from 4.7% to 5.6%. Over the same period, VUDU’s share of the market remained the same, 2.1%. It’s interesting to also note that iTunes share fell, from 9.3% to 8.3%.

As well, growth in the transactional market has slowed a lot over the last 3 years. In the 4 quarters ending in Q2 2014, TVOD revenue grew 16%. In the same four quarters ending in Q2 2016, growth has fallen to 7%. In the same periods, SVOD growth has remained strong (29% and 21%.)

How AVOD can help TVOD

If VUDU is to increase its share of TVOD sales, and maybe even help accelerate sector growth, it needed to find a way of getting more people to its digital storefront. Adding free-ad-supported movie streaming helps it achieve that goal in two ways. People now have reason to come to the VUDU store other than to rent or buy a movie. They can see the great quality delivered by the service. They can also search for other movies in the library, and potentially rent or buy them.

Movies on Us will also help in marketing the TVOD service. The company will tell all registered users about Movies on Us, and parent Walmart will promote the new free service in stores and at Walmart.com. At the same, the company can also promote the huge library available to rent and buy.